Federal Ruling Halts Construction of Massive VA Hospital near Denver
The Kiewit-Turner joint venture contracting team stopped work on Dec. 10 on a massive new U.S. Dept. of Veterans Affairs (VA) hospital project in Aurora, Colo., just east of Denver,
The halt follows a federal appeals board ruling the day before that said the VA had breached its contract with the contractors.
Kiewit-Turner filed a request in August to leave the project, after claiming the agency owes the contractor up to $100 million for unpaid work and materials.
The U.S. Civilian Board of Contract Appeals said in its Dec. 9 ruling that the VA had failed to agree on a design to build the project for $604 million, the agreed-upon price.
Instead, the agency has allowed design elements to go forward that are pushing the total cost above $1 billion, according to the ruling.
“Kiewit-Turner must cease all work on the project. We will take all reasonable actions necessary to preserve and protect work currently in place and the materials on-site as we begin a safe and orderly demobilization from the project,” said Scott Cassels, Kiewit Corp. executive vice president, in a Dec. 9 letter to the VA.
A sign at the gate on Dec. 10 said the jobsite is “temporarily closed,” and joint venture officials met with subcontractors most of the day to plan an exit process.
The stoppage means the loss of nearly 1,400 jobs related to the project.
The VA originally said the hospital would open in May 2015. Kiewit-Turner disputed that date, targeting the earliest possible opening to be early 2017. Now that date is also unlikely.
Kiewit-Turner's conditions for moving forward with the project included immediate repayment of the $100 million in past costs, a transfer of project management from the VA to the U.S. Army Corps of Engineers and “a delivery model based on Federal Acquisition Regulation (FAR) cost-reimbursable principles,” Cassels' letter said.
Those conditions had not been met, K-T claimed, and the board agreed. The project was bid as an integrated design and construct contract, or IDc, similar to construction manager at risk, and established separate contracts for the contractor and the designers, with the intention of bringing the contractor into the design process early to help manage costs. It is the first time the VA has attempted to use the IDc delivery process.
In its ruling, however, the board said the VA “did not use the IDc mechanism properly right from the start,” pointing out that the design team—comprised of a joint venture of Skidmore Owings & Merrill, S.A. Miro, Cator Ruma and H+L Architects—had been under contract since January 2006 and working on design since November 2007.
K-T was not awarded the job until four years later, well after project design was beyond 50%, and “funding decisions had been made,” the board ruling said. It said the delay limited K-T’s ability to modify the design based on preconstruction analysis.
The VA has pointed fingers at the design team, claiming that it created an overly complex design that was too focused on aesthetics and misled the agency about whether the design could be built within budget. The design team had also asked to leave the project, but the VA refused its request.
“The agency failed to provide a design that could be constructed within the estimated construction cost at award because it did not control its designer,” the appeals board ruling said. “The VA has not comported itself with standards of good faith and fair dealing required by the law,” it said.
Meanwhile, state and national officials are scrambling for ways to restart the project using reserve funds from the federal government and, possibly, a new management structure.
U.S. Sen. Michael Bennet (D-Colo.) said in Dec. 10 statement: “Our veterans have waited far too long for this hospital to be built.”